BRIAN BELSKI: Big Investors Aren't Ready For What Could Be Coming Next

Sam Ro | Jun. 9, 2013, 8:07 AM | 5,839 | BMO Capital's Brian Belski has increasingly sounded alarms as the stock market blew past his once-bullish targets.

In his latest note to clients, Belski reiterates his thesis that the big investors are only buying into this rally now because they've been missing out.

He believes this will only make things worse for everyone else should things turn south in a big way.

"[W]e continue to believe that most institutional investors are not prepared for a potential period of market weakness," wrote Belski. "Therefore, we believe investors should prepare for more back-and-forth action this summer -- not just up and not just down -- as the market sifts through what is likely to be choppy fundamental and economic data in the coming months."

Here's more from Belski:

The VIX Index is up almost 5 points since mid-May. We believe one of the primary reasons is that economic data have been increasingly disappointing lately. Our analysis shows that periods of decelerating economic data typically coincide with periods of and higher market volatility, which in turn usually equates to poor stock market performance. For instance, we found that the average annual return of the S&P 500 is significantly weaker during periods of increasing VIX levels, particularly during the period where it increases toward its longerterm average of roughly 20 since 1990.

BMO Capital

"[G]iven all of the above, the market is likely stuck in a frustrated and choppy trading range for at least several more months, unless the economic environment (and job growth in particular) begins to pick up more steam and quick," said Belski. "As a result, investors should continue to employ stock picking strategies relative to more passive or indexing strategies."

Belski continues to have a 1,575 year-end target for the S&P 500.

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